‘I am not spending $100 million so that my conscience is free’

Brabeck says water should have value, and pricing is one way to give value clearly, perhaps the most efficient way. Photo: Pradeep Gaur/Mint

Updated: Tue, Nov 06 2012. 12 10 AM IST

New Delhi:Peter Brabeck, the non-executive chairman of the Board of Nestlé S.A., was in New Delhi to participate in the global “Creating Shared Value” Forum 2012 hosted by the company along with the Federation of Indian Chambers of Commerce and Industry. The former chief executive officer of Nestle, who spearheaded the company’s expansion drive between 1998 and 2008, spoke to Mint on creating shared value, water and medical foods. Edited excerpts:

Nestle was among the first companies to embrace the idea of creating shared value. How has your experience been?

We have had a good experience because we have been able to give a theoretical frame(work) to something we have been doing intuitively for many, many years.

It has not revolutionized our thinking but it has allowed us to focus much more on this crucial question about when you make a strategic decision how much value do you really intend to create for the shareholders and (how much) for the society.

The second point is, how many jobs are you creating additionally, or how much waste water are you going to treat?

You now have key performance data—which you are now reporting the same way you were reporting your financial results. Our shareholder report now has financial set of data and societal set of data and both of them are equally important and transparent.

Do the social parameters match the metrics that you desired? For instance, the milestone you may have set on job creation...

When we are going through some of those things, for example, water (usage), we are clearly seeing we have been able to reduce water (usage) from four-and-a-half litres for one dollar of turnover down to one-and-a-half litre of water for one dollar. This is quite substantial. Similarly, we are talking about waste water treatment, or how many of our products have been nutritionally improved, or how much sugar or salt have we taken out. When you start to measure things, it is easier to manage them. And you have more credibility with your own people. If you do not report them, there is always a chance that it might become lip service.

What is your reasoning behind not believing in companies “giving back to society” or philanthropy?

In the old concept of Corporate Social Responsibility, there is always this feeling of philanthropy or the moral obligation to give back to society because you have taken from society. It’s like bad conscience. This is the wrong approach. We are not acting on bad conscience. I am not spending $100 million to buy me a good night’s sleep so that my conscience is free. This reminds me of the middle ages when you could buy (off) your sins and get free. I don’t think we are sinners. By working in a socially responsible manner, we create value for society much more than if we were exploiting this society first and giving some money back afterwards in order to buy good conscience.

Over the years activists have raised several issues around Nestle products such as baby food. There have also been complaints of (the company) acquiring springs for packaged water..

First of all, when you are world’s leading nutrition and wellness company, not necessarily 100% people have to adore you. Part of being successful is that you also produce some enemies or people who are questioning you perhaps a little bit more than is necessary. This is normal; it’s the price of an open society. I take it constructively and I listen very carefully to anybody who criticises. Afterwards we make up our minds if the criticism is justified and sometimes it is. When we have 330,000 people working in the world in a very decentralized manner, mistakes can happen. When a mistake happens, we look at it, rectify it and we go on. If it was a voluntary mistake, if you violate clearly and openly one of our principles, you have to leave the company.

According to reports you apparently said that water should be priced. What do you mean by this?

I have not said water should be priced. What I am saying is that water should have value. And pricing is one way to give value clearly, perhaps the most efficient way.

The UN resolution defines water as a human right—the 25 litres that we need for hydration and minimum hygiene. If everybody in this world would have access to this human right this would account for 1.5% of total water consumption of mankind. What I am saying is the 98.5 % that we are are using to sprinkle our lawn, golf course, to fill our swimming pool or wash our car, is not necessarily a human right. If you give price or value to this water, we would not misuse the water in the manner we are doing today.

If you create a value to water and price it, can it help correct the the inequality of water consumption that you have worldwide? For instance, the US is a prime example of excess water consumption per capita.

To be very honest, no. Water is extremely local. The value of water depends on when, where and how it is available. It’s not the amount of water.

Let’s suppose in Switzerland nobody would take a shower any more. Would this change the situation in India? Not at all. You have to look at local circumstances and ways to find how you can influence the demand side. The supply side is relatively stable. If you look at demand side you can see that it is very open to misuse in the world. We are using much too much water.

How well is your medical food business doing; any plans to bring it to India?

Let me talk in general terms. We have been in the medical food business for quite some time. As a matter of fact we started it as a joint venture, then tried to develop it ourselves and also acquired a big company. We did that because over the years we learnt that there is relationship between food and health. That relationship is nutrition.

Nutrition as a door opener to healthier life, that is basically what we have in our mind. Lately, in the last couple of years, there is a new knowledge coming through new life sciences research and development. That shows you that we are different genomically. The genomics we have is not stable. Genomics changes with external environmental impact. The most important external environmental impact is nutrition or the food you eat. We have to create scientific fundamentals and this is what we have done with the creation of the institute of health sciences located in the University of Lausanne. Once we understand that, we will be able to develop products that are either preventive or can influence a more active life in sickness. The institute was inaugurated on Friday (2 November).

Have you launched any such products?

We have a series of products going in this direction. If you get cancer treatment, your immune system suffers. We developed a product that diminishes the side effects of cancer treatment. For the time being we are looking at a disease but we do not have individualized (products for) patients. Our vision in the long term is that we bring together the understanding of your genomics and tailor make nutrition programme just for you. That is where we want to be one day.

Would you offer any public policy advice to India which is like the malnourishment capital of the world?

What you need first of all is data. You have 47.8% anaemic children for example. Where are they and what are they eating? Once that is available, you can start fortification. Most government and private enterprises should do and must be doing that.

We are for instance fortifying Maggi noodle with iron. But that might not be enough. After the second world war in Europe, all salt sold was iodized to avoid goitre.

Once you have data base you can focus and localize and use micronutrients to fortify products.

You talked about generating jobs as part of creating shared value. Unemployment is one of the world’s gravest problems today. It is close to 50% in Spain among youth. It is an issue in the US and is never reported in India. How do you, as chairman of a food behemoth, look at this problem, considering that even the free market model has been challenged and issues of inequality are being discussed far more fervently than they ever were before?

The equation about inequality is a fundamental question without doubt and as a fast moving consumer goods company, I have every interest that there is more equality. To be honest , if you look at the global picture we have more equality today than ever before. We have a bigger middle class than before. Globally, one billion new people have entered the middle class and have flattened out inequality. Not everything is black and white. Inequality in some parts (of the world) may have increased.

In Greece and Spain, especially Greece since it joined the European Union (EU), salaries have increased by 68% without economic productivity increasing. That is because when you are joining the EU you get a lot of subsidies because you are on the periphery. So the salaries went up but the productivity remained the same and competitiveness went away.

That is the issue. How do we get the competitiveness of those countries back? When you can re-establish the productivity of an economy can you create jobs.